UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549
                                 FORM 10-K
[ X ]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934
                For the fiscal year ended December 31, 1998                

                                    OR

[   ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                     THE SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from
                                                                  
                                    to

                         Commission file number 1-7348

                         DYNAMICS RESEARCH CORPORATION
            (Exact Name of Registrant as Specified in Its Charter)

             Massachusetts                            04-2211809
     (State or Other Jurisdiction of     (I.R.S. Employer Identification No.)
     Incorporation or Organization)     

          60 FRONTAGE ROAD     
       ANDOVER, MASSACHUSETTS                           01810-5498
(Address of Principal Executive Offices)                (Zip Code)

Registrant's telephone number, including area code: (978) 475-9090

          Securities registered pursuant to Section 12(b) of the Act:
                                           Name of Each Exchange on
     Title of Each Class                       Which Registered
           NONE                                 NOT APPLICABLE

         Securities registered pursuant to Section 12(g) of the Act:
                        COMMON STOCK, $.10 Par Value
                              (Title of Class)



    Indicate by check mark whether the Registrant (1) has filed 
all reports required to be filed by Section 13 or 15(d) of the 
Securities Exchange Act of 1934 during the preceding 12 months 
(or for such shorter period that the Registrant was required to 
file such reports), and (2) has been subject to such filing 
requirements for the past 90 days.          Yes   X   No   .

(Continued)
    Indicate by check mark if disclosure of delinquent filers 
pursuant to Item 405 of Regulation S-K is not contained herein, 
and will not be contained, to the best of registrant's 
knowledge, in definitive proxy or information statements 
incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K.   [ ]   

    As of March 19, 1999, the aggregate market value of Common 
Stock held by nonaffiliates of the Registrant was $22,710,053 
and the number of shares of Common Stock, $.10 par value, of 
the Registrant outstanding was 7,356,090.

                  Documents Incorporated By Reference
Portions of the 1998 Annual Report to Shareholders are 
incorporated by reference in Parts I and II.  Portions of the 
Registrant's Proxy Statement for the 1999 Annual Meeting of 
Shareholders are incorporated by reference in Part III. 

The Exhibit Index is on pages 25 and 26.



                         DYNAMICS RESEARCH CORPORATION
                                   Form 10-K
                For the Fiscal Year Ended December 31, 1998

Part I                                                       Page

Item      1.     Business                                      4

          2.     Properties                                   11

          3.     Legal Proceedings                            11

          4.     Submission of Matters to a Vote of
                  Security Holders                            11

          4A.     Executive Officers of the Registrant        11

Part II
          5.     Market for Registrant's Common Equity and
                  Related Stockholder Matters                 12

          6.     Selected Financial Data                      12

          7.     Management's Discussion and Analysis of 
                  Financial Condition and Results
                  of Operations                               12

          8.     Financial Statements and Supplementary Data  13

          9.     Changes in and Disagreements with
                  Accountants on Accounting and
                  Financial Disclosure                        13

Part III
          10.     Directors and Executive Officers
                   of the Registrant                          14

          11.     Executive Compensation                      14

          12.     Security Ownership of Certain
                   Beneficial Owners and Management           14

          13.     Certain Relationships and
                   Related Transactions                       14

Part IV
          14.     Exhibits, Financial Statement
                   Schedules, and Reports on Form 8-K         15
    

PART I

Item 1. Business

    Dynamics Research Corporation (referred to as DRC or the 
Company) was organized in 1955 under the laws of the 
Commonwealth of Massachusetts. The Company develops and 
operates computer and communication-intensive information 
systems, provides engineering, management support and 
information technology services, and produces precision 
manufactured components for industrial measurement and control.   
The Company's Systems and Services segment represents 85% of 
revenue from continuing operations for the year ended December 
31, 1998.  Precision manufactured products represent 15% of 
1998 revenue from continuing operations and include encoders 
and electroformed parts.  The Company was also engaged in the 
development and sale of telecommunications fraud control 
systems and object-oriented software development technology.

Systems and Services Segment

    DRC provides systems analysis, integration, and software design 
and development services.  The Segment's information technology 
offerings also include installation, systems operation, and 
maintenance.  Systems built by DRC are used for aircraft 
maintenance and parts tracking; supply chain management; 
training requirements; and for managing state government health 
and human services commitments.
 
    The Company's major Department of Defense (referred to as DoD)
information systems programs are often referred to as
logistics information systems. These DRC-developed product
management information systems manage data related to inventory
requirements and control, maintenance and repair, warranty
analysis, supply, and distribution of numerous products and parts. 

    For nearly 30 years, the Company has assisted the U.S. Navy 
Fleet Ballistic Missile program office in the design, 
development, and operation of inertial systems.  The Company 
has extensive experience with the Polaris, Poseidon, and 
Trident missile guidance systems and submarine inertial 
navigation systems. The Company develops and maintains 
performance, reliability, and logistics databases for the 
inertial guidance instruments housed in those systems. These 
databases track detailed information on thousands of component 
parts comprising the systems. In connection with these 
databases, the Company has successfully integrated customer 
workflow and database activity information with Internet 
technology.  This information is used by the customer for a 
wide range of operating management tasks and decision making. 

    The Company provides independent analysis and monitoring of 
submarine-based, inertial guidance systems and electronic 
modules for the U.S. Navy Fleet Ballistic Missile Program 
Office. DRC's Inertial Instrument Test Laboratory is equipped 
for full-scale performance testing of navigational quality 
inertial instruments.  The Company designs, constructs, 
installs, trains, and supports test equipment used in the U.S. 
Navy Trident program. 

    DRC is also involved in the design of a closed-loop system used 
in the field of parameter control in semiconductor manufacture. 
This process is being developed along with other companies 
under the auspices of the U.S. Navy in the San Diego, 
California, Space and Naval Warfare Systems Center.  DRC 
performs computer-aided, semiconductor circuit analysis for its 
Navy customer as well as commercial companies. 

    The DRC-developed Weapon Systems Management Information System 
(WSMIS) assesses the "health" and capability of the U.S. Air 
Force weapon systems to meet wartime objectives.  DRC has 
served as the overall functional integrator of WSMIS and the 
developer of most WSMIS modules. The Company currently provides 
WSMIS operational and software development support.  As a 
decision-support tool for assessing the impacts of logistics 
status on potential wartime capabilities, WSMIS computes 
inventory requirements, purchasing needs, and logistics 
capability assessments for complex, high-priced aircraft spare 
parts necessary to meet aircraft availability requirements.

    A major component of the Company's DoD business consists of a 
wide variety of engineering, technical assistance and 
management support services performed under various indefinite 
order, indefinite quantity contracts.  Work performed under 
these contracts is generally done on a time and materials basis 
utilizing a wide range of the Company's technical and 
management skills to plan, analyze, design, test, support, 
train, maintain, and dispose of a variety of complex systems. 
Systems include radar, missile, aircraft, information, 
software, and munitions.

    The Company provides support at all stages of a system's life 
cycle. In response to emerging requirements, the Company helps 
its Federal Government customers define, develop, and initiate 
new programs.  The Company also helps customers obtain program 
approval, conduct strategic planning, and evaluate proposals 
from private contractors. After prime contract awards, the 
Company helps monitor contractor activities, evaluate progress, 
and measure performance against program requirements.  Products 
and services include computer-based training, systems 
integration, and business process improvement/reengineering.  
Under a variety of contracts, DRC supports the U.S. Air Force 
at bases such as Hanscom Air Force Base, Scott Air Force Base, 
Langley Air Force Base, Maxwell Air Force Base, Gunter Annex, 
and Peterson Air Force Base. 

    In 1995, the U.S. Air Force awarded DRC a five-year contract 
for Technology Task-Order Engineering Services (TTOES).  
Originally valued at up to $23.7 million, in 1997 the contract  
ceiling was increased to $31.2 million.  DRC has provided 
engineering, logistics, and software support on programs such 
as the B-1B, the B-2, the B-52, the KC-135, and the E-3A 
aircraft repair, maintenance, and upgrade programs. From its 
origin at the Oklahoma City Air Logistics Center (ALC), DRC has 
expanded its TTOES task orders to include work at other ALC's 
located at Warner Robins, GA; Ogden, UT; and San Antonio, TX.  
Additional tasking has centered on providing support to Air 
Force reengineering and business process improvement 
initiatives at these ALC's.    

    Since 1993, DRC has provided the US Army Aviation and Missile 
Command with specialized studies and analyses in 
aviation/missile system development, acquisition and 
sustainment.  Since 1996, the Company has been a prime 
contractor on a five-year, $33 million contract under a U.S. 
Army program known as Programmatic and Technical Support.  DRC 
supports a broad range of helicopter and missile systems in 
varying life cycle stages.  Additionally, DRC supports other 
U.S. Army activities with acquisition logistics, systems 
engineering and other related program management services from 
its office in Huntsville, Alabama.

    Combining its expertise in weapon system acquisition processes 
with its expertise in systems analysis, design, training and 
simulation and human factors, DRC performs human-systems 
integration and force analysis. Since 1987, DRC has provided 
force analysis support to the Army Research Laboratory.  These 
activities are focused on developing tools that support 
analyzing soldier and system effectiveness, identifying and 
assessing force improvement options (doctrine, training, leader 
development, organization and material), and ensuring soldier 
considerations are addressed in force improvements.  Also, 
under contract from the U.S. Army Research Laboratory, DRC 
provides analysis, system development and support in several 
functional areas which include assessment of manpower, 
personnel and training issues; analysis of soldier systems 
performance; and integration of methods and databases for use 
by system designers. 

    DRC is the developer of the Training System Requirements 
Analysis (TSRA) Tools, which are a set of  computer programs 
designed to help instructional designers perform the initial 
phases of the Instructional Systems Development (ISD) process.  
The TSRA Tools have been developed with the Naval Air Warfare 
Center Training Systems Division (NAWCTSD) and are widely used 
throughout the DoD by government and contractor organizations.
The market for DRC's TSRA Tools has expanded beyond the military
to include the Federal Aviation Administration and National Mine
Health and Safety Academy.

    As a subcontractor to Lockheed Martin, DRC is supporting the 
U.S. Army's Warfighter Simulation 2000, a simulation system 
supporting the training of commanders and staff under a wide 
variety of battlefield scenarios.  DRC services include 
providing military subject matter experts, software and human 
factors engineering, database development for equipment and 
knowledge acquisition, as well as manpower staffing reduction 
analysis.

    DRC is also a subcontractor to Lockheed Martin for the Close 
Combat Tactical Trainer (CCTT) program.  CCTT simulates Army 
tank and mechanized infantry units from vehicle crews to the 
battalion level.  CCTT uses distributed, interactive simulation 
technology to provide a "virtual" training environment.  DRC 
conducts all manpower and personnel integration activities 
associated with the CCTT.  DRC is playing a similar role as a 
subcontractor to Lockheed Martin on the United Kingdom Combined 
Arms Tactical Trainer, the UK's version of the CCTT.

    DRC is a subcontractor to Raytheon on the U.S. Air Force 
National Air and Space Model (NASM).  The Company is developing 
conceptual models and collecting data on mission space objects 
and processes.

    The Company is in its third year of a U.S. Army, four-year 
contract, valued at approximately $13.0 million, to implement, 
apply, and manage DRC-developed teamwork training principles to 
improve performance in high-pressure environments.  The project 
focus is on improving teamwork in emergency-room settings at 
more than 15 civilian and military hospitals.

    In March 1998, DRC was awarded a contract under the Air Force 
Aeronautical Systems Center Advisory and Assistance Services 
(A&AS) Omnibus program.  The purpose of this contract is to provide support
for engineering, manufacturing, configuration/data management,
acquisition management and test and evaluation required in
the acquisition, development, production and sustainment of
various equipment and weapons systems.  The contract provides DRC
the opportunity to compete against other companies for tasks under
the A&AS Omnibus program over three years. 

    In recent years, the Company has expanded beyond the DoD 
marketplace and won various state and Federal agency contracts.  
The Company implemented a distributed computer-based Statewide 
Automated Child Welfare Information System (SACWIS) for the 
State of New Hampshire.  This system manages child welfare 
cases handled by the State's Department of Health and Human 
Services. Under ongoing contracts DRC provides additional 
functional and technical enhancements to the SACWIS system as 
well as other information technology services.

    In February 1997, DRC was awarded a contract to design, 
deliver, install and maintain a statewide information 
technology (IT) infrastructure that supports the Ohio Child 
Support Enforcement Tracking System (SETS).   The IT 
infrastructure the Company is developing automates the work of 
more than 4,250 Child Support Enforcement workers throughout 
Ohio's 88 counties.   In November 1997, the State of Ohio 
awarded the Company a contract for additional computer network 
infrastructure and related services.  DRC continues to provide 
computer hardware and software, site preparation and 
installation, and technical support services for the SACWIS and 
Ohio Works First System that support Ohio's welfare reform 
initiatives.

    In December 1997, DRC received a  three-year contract from 
the State of Colorado Department of Human Services to serve as 
a prime contractor for its Children, Youth and Families 
project.  The contract is a result of a competitive procurement 
for the design, development and implementation of a child 
welfare and youth corrections system consisting of software, 
training and a state-wide computer network infrastructure.  The 
contract includes options for four additional years of system 
maintenance and support.

    The Company continues to provide the U.S. Department of 
Treasury with information technology services for the Internal 
Revenue Service and other Treasury departments.  Year 2000 
software and system certification projects represent the 
majority of activity under this contract.
    
    Critical to the development of information systems is the 
Company's software development process and related tools.  The 
Company's approach to mission-critical software stresses 
principles of continuous software quality evaluation and 
increased visibility throughout the software development life 
cycle.  To this end, DRC has achieved Level-2 certification 
under the standards of the Software Engineering Institute and 
is actively pursuing Level-3 certification.

Precision Manufactured Products 

    The commercial operations of DRC's Precision Products Group 
consists of two divisions:  Encoder Division and Metrigraphics Division.
   
    DRC's Encoder Division designs, manufactures, and markets a 
line of digital encoders that convert analog motion and 
position information into digital signals used in a wide 
variety of industrial products and systems which include: 
machine tools, robotics, engine fuel-control systems, packaging 
equipment and pick-and-place machines.  DRC's digital encoding 
devices are essential elements of today's electronically-
controlled systems and equipment.

    The Encoder Division manufactures an encoder used in engine 
fuel pumps for diesel powered sport utility vehicles, pickup 
trucks and commercial vans.  The encoder is a critical 
component of a computer control system that gauges the amount 
of fuel injected into the cylinders, optimizing usage and 
minimizing the amount of unburned fuel and resultant exhaust 
fumes.

    The Metrigraphics Division uses photolithographic processes to 
manufacture optical discs, scales and reticles that are used 
for precision measurement.  Metrigraphics also uses various 
metal deposition processes, including electroplating and 
electroforming, to produce a variety of precision components.  
Products include printheads and oriface plates used in 
electronic printers and circuitry used in certain medical 
instruments.  Metrigraphics' superior ability to design and 
manufacture components and maintain critical tolerances is an 
important driver for a wide range of high-technology 
applications.

    Metrigraphics' largest market is currently for nozzles used in 
inkjet printer cartridges.  In addition to its electroform parts 
for printers and medical instruments, Metrigraphics 
manufactures precision glass parts for computer peripherals, 
factory automation equipment, electronic instrumentation and 
semiconductor equipment.

Telecommunications Fraud Control Systems

    Since 1996, the Company has been licensed to enhance, market 
and maintain a telecommunications fraud control system 
developed by Pacific Bell Telephone Company.  DRC has made 
significant investments in this and related systems and 
software technologies to broaden the types of telephone fraud 
detected and to position the product for sale to competitive 
local exchange carriers and others.  The Company's  customers 
include the regional Bell operating telephone companies.  A 
number of recent changes in the telecommunications marketplace 
have delayed near-term sales goals and increased the estimated 
capital required to take advantage of this expanding market.  
In December 1998, the Company adopted a plan to exit 
this business during 1999.

Software Development Technology

    Over a number of years, DRC has invested in the research and 
development of VisualMagic, an object-oriented development 
environment.  This development environment was useful in the design of
Internet applications.  During 1998, the Company acquired an interest
in Empresa, Inc. (formerly Electronic Press Services Group, Inc.)
in exchange for an exclusive license to VisualMagic in certain fields,
cash and the assets of the business.  Empresa also hired DRC's staff.
DRC does not expect to continue its development of Visual Magic.

    Empresa provides e-commerce solutions for small to medium size 
merchants, banks, and other customers seeking a competitive 
advantage by being on-line.  Empresa's solutions include 
turnkey on-line storefronts and transaction processing 
capabilities highly customized to integrate with a customer's 
existing internal systems and with financial institutions.  

Sales & Marketing

    Contracts with defense, state and other government agency
customers are obtained by marketing and technical personnel employed by the
Company.  The Company's other products are sold by sales personnel
employed by the Company and outside sales representatives.

Government Contracts

    During 1998, the Company's revenues from contracts with the
DoD, either as prime contractor or subcontractor, accounted for 
approximately 59% of the Company's total revenues.


    During 1998, the Company's U.S. Government business 
consisted of approximately 101 separate contracts on 16 
different programs.  The Company's contracts with the 
Government are generally subject to termination at the 
convenience of the Government; however, the Company would be 
reimbursed for its allowable costs to the time of termination 
and would be paid a proportionate amount of the stipulated 
profit attributable to the work actually performed.  Although 
Government contracts may extend for several years, they are 
generally funded on an annual basis and are subject to 
reduction or cancellation in the event of changes in Government 
requirements or budgetary concerns.  If the U.S. Government 
curtails expenditures for research, development and consulting 
activities, such curtailment might have an adverse impact on 
the Company's sales and earnings.

    The Company's revenues from contracts with four different states
accounted for approximately 22% of 1998 revenues.  Revenues under
various contracts with the State of Ohio accounted for approximately
13.6% of 1998 revenues.  The Company's state contracts are generally
either fixed-price or time and material.  In certain instances,
funding for these contracts is subject to annual state legislative
approval.

    The Company's government contracts fall into one of three 
categories:  (1) fixed-price, (2) time and materials, and (3) 
cost plus fixed-fee.  Under a fixed-price contract, the 
government pays an agreed upon price for the Company's services 
or products, and the Company bears the risk that increased or 
unexpected costs may reduce its profits or cause it to incur a 
loss.  Conversely, to the extent the Company incurs actual 
costs below anticipated costs on these contracts, the Company 
could realize greater profits.  Under a time and materials 
contract, the government pays the Company a fixed hourly rate 
intended to cover salary costs and related indirect expenses 
plus a profit margin. Under a cost plus fixed-fee contract, the 
government reimburses the Company for its allowable direct 
expenses and allowable and allocable indirect costs and pays a 
negotiated fee.  In 1998, approximately 58% of the Company's state
and federal government contract revenue was under fixed-price or time and 
material contracts, while approximately 42% of revenue was 
under costs plus fixed-fee contracts.

Backlog

    At December 31, 1998, the Company's backlog of unfilled 
orders was approximately $105.4 million compared with $110.0 
million at December 31, 1997.  The Company expects that 
substantially all of its backlog at December 31, 1998 will be 
filled during the year ending December 31, 1999.  The Company 
has a number of multi-year contracts with agencies of the U.S. and
state governments on which actual funding generally occurs on an 
annual basis.  The Company's business does not have seasonal 
characteristics but a portion of its funded backlog is based on 
annual purchase contracts, and the amount of funded backlog as 
of any date can be affected by the timing of order receipts and 
deliveries thereunder.

Competition

    The Company competes with both domestic and foreign firms, 
including larger diversified companies and smaller specialized 
firms.  The U.S. Government's own in-house capabilities are 
also, in effect, competitors because various agencies perform 
certain types of services which might otherwise be performed by 
the Company.  The principal competitive factors for systems and 
services are price, performance, technical competence and 
reliability.  In the commercial businesses, the Company competes 
with other manufacturers of encoders, electroform vendors and 
suppliers of precision measurement scales.  The principal 
competitive factors affecting the precision components 
manufacturing businesses are price, product quality and custom 
engineering to meet customers' system requirements.

Research and Development

    The Company expended approximately $2.7 million (inclusive 
of overhead and other indirect costs) on new product and 
service development during the year ended December 31, 1998, as 
compared to expenditures of $1.2 million during 1997 and $2.2 
million during 1996.

Raw Materials

    Raw materials and components are purchased from a large 
number of independent sources and are generally available in sufficient
quantities to meet current requirements.

Environmental Matters

    Compliance with federal, state and local provisions 
relating to the protection of the environment has not had and 
is not expected to have a material effect upon the capital 
expenditures, earnings or competitive position of the Company.

Employees

    At December 31, 1998, the Company had 1,557 employees.


Proprietary Information

    Patents, trademarks and copyrights are not materially 
important to the business of the Company.  The U.S. Government 
has certain proprietary rights in processes and data developed 
by the Company in its performance of government contracts.

Item 2.  Properties

    The Company leases offices and other facilities, totaling 
approximately 333,000 square feet, which are utilized for its 
federal and state government services, manufacturing and 
warehousing operations as well as its marketing and engineering 
offices.  The Company has manufacturing and office space in 
Wilmington, Massachusetts under three leases totaling 113,000 
square feet, expiring in 2000, with options to the year 2005.  
The remaining leased facilities consist of offices in 29 
locations across the United States.  The Company owns a 135,000 
square foot facility in Andover, Massachusetts that is utilized 
for its defense service operations and corporate administrative 
offices.

    The Company's total rental cost for 1998 was $3.6 million.

    The Company believes its properties are adequate for its 
present needs.   

Item 3.  Legal Proceedings

    The Company is not a party to any material litigation.

Item 4.  Submission of Matters to a Vote of Security Holders

    No matters were submitted to a vote of security holders 
during the fourth quarter of the fiscal year covered by this 
report.

Item 4A.  Executive Officers of the Registrant

    The following is a list of the names and ages of the 
executive officers of the Company indicating all positions and 
offices held by each person and each person's principal 
occupations or employment during the past five years.  The 
executive officers were elected by the Board of Directors and 
will hold office until the next annual election of officers and 
their successors are elected and qualified, or until their 
earlier resignation or removal by the Board of Directors.  
There are no family relationships between any executive 
officers and directors.




                    
                               Age                       Position
                    
John S. Anderegg, Jr.          75                 Chairman and Director
                    
Albert Rand                    72              President, Chief Executive
                                                  Officer and Director
                    
John L. Wilkinson              59                Vice President, Human 
                                                  Resources and Clerk
                                                                      
Douglas R. Potter              48              Vice President of Finance,
                                                Chief Financial Officer

Chester Ju                     49            Vice President, Encoder Division
                                                  and Metrigraphics Division
                                                  
    Each of the persons named above has served in the position 
indicated for more than five years. 




PART II


Item 5.  Market for Registrant's Common Equity and Related 
Stockholder Matters

    The common stock of the Company is traded on the NASDAQ 
National Market under the symbol (DRCO). 

    The high and low prices for the quarters in 1997 and 1998 
are listed below.



                            1998                       1997

                       High       Low              High        Low
First quarter         $11.04    $ 8.75            $ 7.58     $ 6.35
Second quarter         12.25      9.90              7.71       6.44
Third quarter          12.13      6.50              9.38       6.77
Fourth quarter          7.00      4.63             11.88       8.75

    The number of holders of record of the Company's common 
stock are described in the Company's Annual Report to 
Shareholders for 1998 under the caption "Number of 
Shareholders," and such information is incorporated herein by 
reference.

    In September 1984, the Board of Directors indicated its 
intention not to declare cash dividends to preserve cash for 
the future growth and development of the Company. The Company 
did not declare any cash dividends between 1984 and 1998 and 
does not anticipate doing so for the foreseeable future.

Item 6.  Selected Financial Data

    The section entitled, "Five Year Summary of Selected 
Financial Data" in the Company's Annual Report to Shareholders 
for 1998 is incorporated herein by reference.

Item 7.  Management's Discussion and Analysis of Financial 
Condition and Results of Operations

    The section entitled "Management's Discussion and Analysis 
of Financial Condition and Results of Operations" in the 
Company's Annual Report to Shareholders for 1998 is 
incorporated herein by reference.

     The Company has made and may make statements from time to time
which constitute or contain forward looking information as that
term is defined within the meaning of the Federal securities laws.
These statements may be identified by such forward-looking words or
other forward-looking terminology.  Forward-looking statements are not
guarantees of future performance and actual results may differ materially
from those in the forward-looking statements as the results of risks and
uncertainties including those identified in Exhibit 99.  The Company
assumes no obligation to update any forward-looking information.

Item 8.  Financial Statements and Supplementary Data

 The following financial statements are filed as part of this Annual Report:

Report of Independent Public Accountants

Consolidated Balance Sheets at December 31, 1998, December 31, 1997 and
 December 28, 1996

Consolidated Statements of Operations for the three years ended
 December 31, 1998

Consolidated Statements of Shareholders' Investment for the three years
 ended December 31, 1998

Consolidated Statements of Cash Flows for the three years ended
 December 31, 1998

Notes to Consolidated Financial Statements

    (The consolidated financial statements and related notes 
listed above are incorporated by reference to the Company's 
Annual Report to Shareholders for the year 1998.)

Report of Independent Public Accountants on Schedules to Consolidated
 Financial Statements

Schedule VIII    - Valuation and Qualifying Accounts for the three years
 ended December 31, 1998

The foregoing report of independent public accountants and schedule
 is included as part of Item 14 of this Annual Report on Form 10-K
 and are set forth on page F-1 and F-2 filed herewith.

    All other financial statements and schedules have been 
omitted because the information required to be submitted has 
been included in the financial statements and related notes or 
they are either not applicable or not required under the rules 
of Regulation S-X.

    Quarterly financial data presented on page 16, and 
Management's Discussion and Analysis of  Financial Condition 
and Results of Operations presented on pages 17-22, of the 
Company's Annual Report to Shareholders for the year 1998, are 
also incorporated herein by reference.  With the exception of 
the portions listed in the above index, the Annual Report 
referred to above is not to be deemed filed as part of the 
financial statements.

Item 9.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure

    Not applicable.



PART III


Item 10.  Directors and Executive Officers of the Registrant 

    Information with respect to Directors of the Registrant in 
the section entitled "Election of Directors" in the Company's 
definitive proxy Statement for the 1998 Annual Meeting of 
Stockholders, which will be filed with the Securities and 
Exchange Commission within 120 days after the close of the 
fiscal year ended December 31, 1998, is incorporated herein by 
reference.

    Information relating to the Executive Officers of the 
Company is included in Item 4A of Part I of this Form 10K.

    
Item 11.  Executive Compensation

    Information called for by this item is incorporated by 
reference from the section entitled "Compensation and Related 
Matters" in the Company's definitive Proxy Statement for the 
1999 Annual Meeting of Stockholders, which will be filed with 
the Securities and Exchange Commission within 120 days after 
the close of the fiscal year ended December 31, 1998.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

    Information called for by this item is incorporated by 
reference from the sections entitled "Common Stock Ownership of 
Certain Beneficial Owners and Management" in the Company's 
definitive Proxy Statement for the 1998 Annual Meeting of 
Stockholders, which will be filed with the Securities and 
Exchange Commission within 120 days after the close of the 
fiscal year ended December 31, 1998.

Item 13.  Certain Relationships and Related Transactions

    Not applicable.


                               PART IV


Item 14.  Exhibits, Financial Statement Schedules, and Reports 
          on Form 8-K 

    (a)   (1) and (2) Financial Statements and Schedules - See Item 8.

    (a)   (3) Exhibits.  The exhibits that are filed with this 
              Form 10-K, or that are incorporated herein by 
              reference, are set forth in the Exhibit Index, which 
              appears in Part IV of this report on pages 24 and 25.

    (b)   Reports on Form 8-K.

          No reports on Form 8-K were filed by the Company during the
          last quarter of fiscal 1998.


            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
                     TO CONSOLIDATED FINANCIAL STATEMENTS


To Dynamics Research Corporation:

    We have audited in accordance with generally accepted 
auditing standards, the consolidated financial statements 
included in Dynamics Research Corporation's annual report to 
shareholders incorporated by reference in this Form 10-K, and 
have issued our report thereon dated February 18, 1999.  Our 
audit was made for the purpose of forming an opinion on those 
statements taken as a whole.  The schedule listed in the 
accompanying index is the responsibility of the company's 
management and is presented for purposes of complying with the 
Securities and Exchange Commission's rules and is not part of 
the basic financial statements.  This schedule has been 
subjected to the auditing procedures applied in the audit of 
the basic financial statements and, in our opinion, fairly 
states in all material respects the financial data required to 
be set forth therein in relation to the basic financial 
statements taken as a whole.


                                            ARTHUR ANDERSEN LLP


Boston, Massachusetts,
February 18, 1999



                                                            Exhibit 99

          IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS


The following factors, among others, could cause the Company's 
actual results and performance to differ materially from those 
contained in forward-looking statements made in this report and 
presented elsewhere by or on behalf of the Company from time to 
time.

Uncertainties as to Department of Defense and Other Federal Agency Budgets

     In 1998, approximately 59% of the Company's revenue
was with the DoD and its Services. In the past, the Company's
defense business has been adversely affected by significant changes
in defense spending during periods of declining U.S. defense budgets.
Among the effects of this general decline has been increased
competition within a consolidating defense industry.  It is not possible
for the Company to predict whether defense budgets will increase or 
decline in the future.  Further, changing missions and 
priorities in the defense budget may have adverse effects on 
the Company's business.  Funding limitations could result in a 
reduction, delay, or cancellation of existing or emerging 
programs.  The Company anticipates there will continue to be 
significant competition when the Company's defense contracts 
are rebid as well as significant competitive pressure to lower 
prices, which may reduce profitability in this area of the 
Company's business.  Any reduction in the level or 
profitability of the Company's defense business, if not offset 
by new commercial business or other business, will adversely affect
the Company's business, financial condition and results of operations. 
   
Government Contracting Risks

     The Company has historically derived a substantial portion
of its revenue from contract and subcontracts with the U.S.
Government.  In recent years, the Company has entered into significant
information technology services contracts with various state
governments.  A significant portion of the Company's federal and state
government contracts are of a time and materials nature, with fixed
hourly rates that are intended to cover salaries, benefits, other 
indirect costs of operating the business and profit.  The 
pricing of such contracts is based upon estimates of future 
costs and assumptions as to the aggregate volume of business 
that the Company will perform in a certain business division or 
other relevant unit.  For long term contracts, the Company must 
estimate the costs necessary to complete the defined statement 
of work and recognize revenues or losses in accordance with 
such estimates.  Actual costs may vary materially from the 
estimates made from time to time, necessitating adjustments to 
reported revenue and net income.  Underestimates of the costs 
associated with a project could adversely affect the Company's 
overall profitability and could have a material adverse effect 
on the Company's business, financial condition and results of 
operations.

     A significant portion of the Company's federal and state
government contracts are renewable on an annual basis, or are subject
to the exercise of contractual options.  Multi-year contracts often
require funding actions or other appovals by U.S. Government, state
legislature or others on an annual or more frequent basis.  As a result,
the Company's business could experience material adverse consequences
should such funding actions or other approvals not be taken. 

     Governmental awards of contracts are subject to
regulations and procedures that permit formal protests by 
losing bidders.  Such protests may result in significant delays 
in the commencement of expected contractual effort, or the 
reversal of a previous award decision, which could have a 
material adverse effect on the Company's business, financial 
condition and results of operations.

     Because of the complexity and scheduling of contracting 
with government agencies, from time to time costs are incurred in 
advance of contractual funding.  In some circumstances, such costs may
not be recovered in whole or in part under subsequent contractual
actions.  Failure to collect such amounts may have material
adverse consequences on the Company's business, financial condition
and results of operations.

     Costs incurred in connection with government contracts are 
generally subject to audits.  Such audits may result in 
material disallowances, which could have an adverse effect on 
the Company's  business, financial condition and results of 
operations.

     A substantial portion of the Company's U.S. Government 
business is as a subcontractor.  In such circumstances,
the Company generally bears the risk that the prime
contractor will meet its performance obligations to the U.S.
Government under the prime contract and that the prime 
contractor will have the financial capability to pay the 
Company amounts due under the subcontract.  The inability of a 
prime contractor to perform or make required payments could 
have a material adverse effect on the Company's business, 
financial condition and results of operations.

     The U.S. Government has the right to terminate contracts for 
convenience.  In such a termination, the Company would 
generally recover costs incurred up to termination, costs 
required to be incurred in connection with the termination, and 
a portion of the fee earned commensurate with the work 
performed to termination.  However, significant adverse effects 
on the Company's indirect cost pools may not be recoverable in 
connection with a termination for convenience.  Contracts with 
state and other governmental entities are subject to the same 
or similar risks.
 
Dependence on Key Personnel

     The Company is dependent on its key technical personnel.  
In addition, certain technical contributors may have specific 
knowledge and experience related to various government customer 
operations that would be difficult to replace in a timely 
fashion.  The loss of the services of key personnel could have 
a material adverse effect on the Company's ability to perform 
required services under certain contracts, or to retain such 
business after the expiration of the current contract, or to 
win new business where certain personnel have been identified 
as key personnel in the proposal, any of which could have a 
material adverse effect on the Company's business, financial 
condition and results of operations.  

Competition

     The government contracting business is subject to intense 
competition, both technical and pricing, from numerous 
companies, many of which have significantly greater financial, 
technical and marketing resources than the Company.

     Competition in the market for the Company's commercial 
products is also intense.  There is a significant lead time for 
developing such business, and it involves significant capital 
investment including development of prototypes and investment 
in manufacturing equipment.  The Company's precision products 
business has a number of competitors, many of which have 
significantly greater financial, technical and marketing 
resources than the Company.

Risks Associates with New Markets and New Products

     In its efforts to enter new markets, including Government 
agencies other than the DoD and commercial markets, the Company
faces significant competition from other companies that have
prior experience with such potential customers as well as significantly
greater financial, technical and marketing resources than the Company.
As a result, the Company's efforts to enter such new markets
may not achieve the level of success sought by the Company.

     The Company has licensed its object-oriented software 
technology to a third party and made an investment in that 
company.  There is no assurance that the investee company's 
products and services will meet with market acceptance or that 
they will be able to compete in the development and 
distribution of such products with competitors that have 
significantly greater resources and experience.  Failure to 
operate profitably or to raise new capital, if required, may 
adversely affect the Company's investment.

Concentration of Customers

     Within the DoD, individual services and program offices account
for a significant portion of the Company's Government business.
One state customer accounts for a significant portion of the
Company's revenue.  Two customers account for a significant
portion of the revenue of the Company's commercial manufacturing
divisions.  No assurance can be provided that any of these customers
will continue as such or will continue at current levels.  A decrease
in orders from any of these customers would have an adverse effect
on the Company's profitability, and the loss of any large customer 
could have a material adverse effect on the Company's business, 
financial condition and results of operations.

Risk of Product Claims

     The Company's precision manufactured products are 
generally designed to operate as important components of 
complex systems or products and defects in DRC products could 
cause the customer's product or systems to fail or perform 
below expectations.  Like other manufacturing companies, the 
Company may be subject to claims for alleged performance issues 
related to its products.  There can be no assurance any such 
claims, if made, will not have a material adverse effect on the 
Company's business, financial conditions or results of 
operations.

Risk of Economic Events Effecting the Company's Business Segments

     Certain of the Company's precision products are components 
of commercial products. Factors that affect the production and 
demand for such products, including economic events both 
domestically and in other regions of the world, competition, 
technological change and production disruption, could adversely 
affect demand for the Company's products.  Certain of the 
Company's products are incorporated into capital equipment, 
such as machine tools and other automated production equipment, 
used in the manufacture of other products.  As a result, this 
portion of the Company's business may be subject to 
fluctuations in the manufacturing sector of the overall 
economy.  An economic recession, either in the U.S. or 
elsewhere in the world, could have a material adverse effect on 
the rate of orders received by the commercial divisions.  
Significantly lower production volumes resulting in under-
utilization of the Company's manufacturing would adversely 
affect the Company's business financial condition and results 
of operations.

Technological Change

     The Company's knowledge base and skills in the government 
contracting area are sophisticated and involve areas in which 
there have been and are expected to continue to be significant 
technological change.  There is no assurance that the Company 
will continue to be able to offer services that satisfy its 
customers' requirements at a competitive price.  Many of the 
Company's products are incorporated into sophisticated 
machinery, equipment or electronic systems.  Technological 
changes may be incorporated into competitors' products that may 
adversely affect the market for the Company's products.  
Further, there can be no assurance that the Company's research 
and product development efforts will be successful or result in 
new or improved products that may be required to sustain the 
Company's market position.

Uncertainty of Future Financing

     Although the Company has no immediate plans to raise 
additional capital, in the future it may need to raise 
additional funds through public or private debt or equity 
financing.  There can be no assurance that any such funding 
will be available or of the terms or timing of any such 
funding.



SIGNATURES

    Pursuant to the requirements of Section 13 or 15 (d) of the 
Securities Exchange Act of 1934, the registrant has duly caused 
this report to be signed on its behalf by the undersigned, 
thereunto duly authorized.

Date:  March 30, 1999

                                         DYNAMICS RESEARCH CORPORATION

                                             by:  /s/ Albert Rand     
                                            Albert Rand, President
                                        (Principal Executive Officer)
     

    Pursuant to the requirements of the Securities Exchange Act 
of 1934, this report has been signed below by the following 
persons on behalf of the registrant and in the capacities 
indicated on the 30th of March, 1999.
     
     /s/ Albert Rand     
         Albert Rand          Director, President, Chief Executive Officer

     
     /s/ Douglas R. Potter
         Douglas R. Potter           Vice President of Finance, Chief
                                  Financial Officer (Principal Financial and
                                            Accounting Officer)

     
     /s/ John S. Anderegg, Jr.
         John S. Anderegg, Jr.               Director, Chairman

     
     /s/ Francis J. Aguilar     
         Dr. Francis J. Aguilar                    Director

          
     /s/ Martin V. Joyce, Jr.
         Martin V. Joyce, Jr.                      Director

     /s/ Kenneth F. Kames
         Kenneth F. Kames                          Director

     
     /s/  James P. Mullins
          Gen. James P.Mullins                     Director


                                    SCHEDULE VIII

                   DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES

                         VALUATION AND QUALIFYING ACCOUNTS

                    FOR THE THREE YEARS ENDED DECEMBER 31, 1998

                             (in thousands of dollars)

                  ALLOWANCE FOR DOUBTFUL ACCOUNTS AND SALES RETURNS



Balance, December 30, 1995                              $402
Additions charged to expense                              54
Write-off of uncollectible accounts, net                (116)
     
Balance, December 28, 1996                              $340
Additions charged to expense                              86
Write-off of uncollectible accounts, net                (209)
     
Balance, December 31, 1997                              $217
     Additions charged to expense                        149          
     Write-off of uncollectible accounts, net            (50)

Balance, December 31, 1998                              $316



         ACCRUAL OF LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS

Balance, December 31, 1997                            $    -
     Additions charged to discontinued
      operations expense                               4,418          
     

Balance, December 31, 1998                            $4,418



                               EXHIBIT INDEX

3.0  Certificate of Incorporation and By-Laws.

3.1   Restated Articles of Organization dated May 22, 1987.  (Incorporated
      by reference to the Registrant's Form 10-Q for the quarter ended 
      6/13/87)

3.2   By-Laws dated May 22, 1987.  (Incorporated by reference to the
      Registrant's Form 10-Q for the quarter ended 6/13/87)

4.0   Instruments defining the rights of security holders, including
      indentures.

4.1   Common stock certificate.

4.2   Certificate of Vote of Directors Establishing Series B Preferred
      Stock (Incorporated by reference to the Registrant's Form 8-K
      on June 25, 1998).

4.3   Amendment to Certificate of Vote Establishing Series B
      Preferred Stock.

4.4   Rights Agreement dated as of February 17, 1998 between the
      Company and American Stock Transfer & Trust Company,
      as Rights Agent.  (Incorporated by reference to the Registrant's
      Form 8-K on June 25, 1998)


10.0  Material Contracts

10.1  Amended 1983 Stock Option Plan.  (Incorporated by reference to the
      Registrant's Form 10-K for the year ended 12/27/87)

10.2  Form of Dynamics Research Corporation Indemnification Agreement
      for Directors.  (Incorporated by reference to the Registrant's Form 
      10-K for the year ended 12/28/91)

10.3  Form of Dynamics Research Corporation Severance Agreement for Messrs.
      Anderegg and Rand.  (Incorporated by reference to the Registrant's
      Form 10-K for the year ended 12/28/91)

10.4  Dynamics Research Corporation Deferred Compensation Plan for
      Non-Employee Directors.  (Incorporated by reference to the
      Registrant's Form 10-K for the year ended 12/28/91)

10.5  Form of Consulting Agreement between Dynamics Research Corporation
      and Albert Rand.  (Incorporated by reference to the Registrant's
      Form 10-Q for the quarter ended 3/31/97)

10.6  Form of Supplemental Retirement Pension Agreement between Dynamics
      Research Corporation and Albert Rand.  (Incorporated by reference
      to the Registrant's Form 10-Q for the quarter ended 3/31/97)

10.7  Amended 1993 Equity Incentive Plan.

10.8  Amended 1995 Stock Option Plan for Non-Employee Directors. 
      
10.9  Amended and Restated Revolving Credit Agreement dated as of December
      31,1998 between Dynamics Research Corporation and a syndicate of banks
      and financial institutions, with Brown Brothers Harriman and Company
      as the agent.

10.10 First Amendment to Amended and Restated Revolving Credit Agreement
      dated as of December 31, 1998 between Dynamics Research Corporation
      and a syndicate of banks and financial institutions, with Brown
      Brothers Harriman and Company as the agent.
 
13.0  Annual Report to security holders, Form 10-Q or quarterly reports to
      security holders.

13.1  The Company's Annual Report to Shareholders for the year ended
      December 31, 1998 filed herewith with the exception of the
      information incorporated by reference in parts I, II and IV of this
      Form 10-K is not deemed to be filed as part of this report.
     
23.0  Consents of experts and counsel

23.1  Consent of Independent Accountants (Arthur Andersen LLP) dated
      March 26, 1999 filed herewith.

99.0  Important Factors Regarding Forward-Looking Statements.

All documents incorporated by reference may be found at Commission
 file number 1-7348.